Green Capital: Growing investor interest in India’s clean energy sector

The Indian government has set an ambitious target of reaching carbon neutrality by 2070. Fortuitously, the re­newable energy sector in the country is booming and presents a massive growth potential over the coming years. At present, India has a substantially underpenetrated electricity market with electricity consumption of 1,208 kWh per capita as compared to the global average of 3,300 kWh per capita. However, this is expected to increase, driven by various demand-si­de factors as well as supportive regulatory policies that favour the household electrification drive, adoption of e-mobility and 24×7 power for all. The Make in India programme is also bolstering the manufacturing sector, which will further enhan­ce the demand for electricity, particularly from green sources.

A recent report by Avendus Capital titled “Energy transition and Clean Energy Investment in India” states that investment interest in the Indian energy transition sector swelled in 2022, despite the global ec­o­nomic slowdown. The sector is expec­ted to witness a massive transition over this de­cade, with companies investing in several emerging businesses focused on de­carbonisation. The energy transition of­fers an overall annual investment op­portunity of over $25 billion.

Renewable Watch presents key insights from the report…

Recent trends

Over the past five years, India’s renewable energy sector has attracted approximately $10 billion in annual investment, with pro­ject investments in 2021 reaching ap­proximately $16.6 billion. According to ea­rly projections by Clean Energy Pipeline, project financing amounts in India also increased significantly in 2022.

According to a recent report by the Lok Sabha Standing Committee on Energy, India needs to invest Rs 2.61 trillion to fulfil the remaining portion of its 175 GW go­al originally set for 2022, but financial difficulties could impede progress. India’s national goals call for 5 million tonnes of green hydrogen annually, and 500 GW of non-fossil-fuel-based capacity (excluding large-scale hydropower) by 2030. These goals can only be met through cooperation between Indian developers and international industry players who have the capital strength and know-how to avoid potential pitfalls.

The report specifically urged the Indian Renewable Energy Development Agency (IREDA), which has provided long-term financing for over 2,900 renewable energy projects with a combined capacity of 19.4 GW, to raise additional funds from both do­mestic and foreign investors. To this end, IREDA is preparing a public listing, an Alternative Investment Fund, and green bond offerings. This will be in addition to the Government of India’s equity in­vestment of Rs 15 billion. These progra­mmes are expected to make India even more appealing to foreign investors who have the financial bandwidth to quicken the country’s transition to clean energy.

International market survey

Data from Clean Energy Pipeline states that international companies have invested $6.7 billion in 49 greenfield renewable en­­ergy projects in India during 2020-2022, including $3.5 billion in onshore wi­nd projects and $2.7 billion in solar PV projects. International greenfield invest­me­nt rose from $1.2 billion in 2020 to over $2.8 billion in 2022, showing a rising interest in foreign investment inflo­ws in the country’s clean energy sector.

In 2022, Avendus Capital and Clean En­ergy Pipeline conducted a survey to de­t­ermine the level of interest among international clean energy stakeholders in India’s clean energy sector. According to the survey, over a third of the respondents (34 per cent) expressed interest in doing business in India, and 16 per cent said they had th­ought about re-entering the Indian market. Additionally, nearly a fifth (18 per cent) had already established operations in India. Moreover, according to the survey, when looking into new clean energy opportunities in India, just 12.5 per cent of respondents indicated interest in brownfield developments, compared to nearly one-third (32 per cent) for greenfield projects.

In addition, according to the survey, the key current barriers to foreign investment in India’s clean energy sector include ra­pidly ch­anging technology, regulatory un­cer­tainty, the price of renewable energy equipment, and the cost of capital to de­velop projects. Finding the ideal local partner to collaborate with is another significant challenge, with a few respondents favouring ma­jority stake investments over minority investments. The management team and project execution credentials were the most important factors for international or­ganisations to consider when evaluating a platform for investment, followed by the quality and size of the existing portfolio.

Overall, survey participants showed a high level of interest and confidence in India’s clean energy market and the ind­ustry’s potential for growth over the coming decades, as demand for low-cost, low-carbon power continues to rise.

Emerging energy transition technologies

The report highlights five key emerging energy transition technologies in India:

Green hydrogen

Stated to be the next major cleantech transformation wave, green hydrogen is expected to generate a $2.5 trillion global market by 2050. Green hydrogen is currently more expensive than hydrogen ma­de from fossil fuels, regardless of whether it has carbon capture (blue hydrogen). Ov­er the past eight years, green hydrogen pro­duction costs have dropped by more than 40 per cent, and it is anticipated that they will continue to fall until they eventually match those of grey and blue hydrogen.

In India, the National Green Hydrogen Poli­cy released by the government introd­uces a variety of incentives to speed up the deployment of green hydrogen and am­monia projects, such as a waiver of interstate transmission charges, monthly energy banking, priority approvals and land allocation. Further steps such as production-linked incentive-type sops and government offtake tenders are also reportedly under discussion, in order to make India a green hydrogen hub over the coming decade.

Energy storage

To maintain grid stability and maximise the use of generation infrastructure, efficient storage systems must be deployed due to the rising proportion of renewable energy sources in India’s power system. Long interconnection lines and onerous land use permission procedures, however, ha­ve the potential to slow down the deployment of energy storage. To increase the adoption of energy storage infrastructure in utility-scale power supply, the Indian government has launched several ro­und-the-clock and storage-based tenders over the last two years. By 2030, the government aims to achieve 10 GW of pu­mped storage and 27 GW (108 GWh) of battery storage. This gives investors and developers tremendous opportunity to shape the future of energy storage development in India.

EV charging infrastructure

While global electric vehicle (EV) sales have skyrocketed, India trails behind at ab­out 1 per cent, resulting in an EV penetration of 9 per cent. A significant obstacle to the adoption of EVs is the lack of public ch­arging infrastructure. To this end, ample ch­arging networks must be de­veloped, re­­quiring significant investments. Global in­vestment in EV charging inf­rastructure reached $5.3 billion in 2021. India is likely to follow suit as EV pe­netration rises in the nation.

The creation of vehicle mandates, financial incentives, and direct funding of charging infrastructure innovations are all important government contributions to the growth of the segment. The Indian government has developed several initiatives, such as Phase II of the Faster Adoption and Manu­facturing of Hybrid and Electric Vehicles scheme, which offers private pl­ayers a subsidy to cover at least 50 per cent of the overall cost for up to 5,000 public charging stations. The government also approved a goods and services tax reduction from 18 per cent to 5 per cent. Further, a draft swapping policy has been released, and the final guidelines should be implemented soon. Going forward, the development of this infrastructure will be accelerated by increased connectivity, and technology standardisation and interoperability.


Carbon capture, utilisation and storage (CCUS) technology raised $186 million in venture capital funding and $176 million in project financing in 2021, according to Clean Energy Pipeline’s Global Market Outlook 2022. More projects are being pl­anned, and several high-profile ones have already started the transition to commercial operation.

According to the International Energy Ag­ency, India will not be able to become carbon-neutral without CCUS technology. The economic viability of CCUS in India is, however, significantly hampered by the high cost of capital and generation. Therefore, cooperative research and development, funding, and policy support are required to enhance CCUS economics and maintain India’s decarbonisation trajectory.

Smart grids

High voltage transmission cables and smart grid technologies will be essential for maintaining a dependable power grid, as intermittent generation makes up an increasing portion of the electricity supply. New power lines are just one option available to grid operators looking to modernise their systems. System losses can also be decreased, grid management en­hanced and volatility reduced by using ad­vanced sensors and demand-side en­ergy management software. Thus, the In­di­an market is now coming up with service-oriented smart solutions for decarbonising the economy.


India provides a huge opportunity for investments in renewable energy and energy transition technologies. Over the past decade, India has established a ro­bust and comprehensive policy and regulatory support system to enable and boost green transition in the country. While the government has been proactive with its clean energy agenda over the past few years, businesses and corporates are no­w also increasingly playing an active role in meeting the country’s clean energy targets. Owing to these factors, and the gr­owing confidence in India’s capabilities in the renewable energy sector, one can expect greater investment inflows in the sector over the coming years.